Term deposit accounts Oct 2016

[Logo]

Do term deposit accounts provide any real value for money at the moment? For the higher rate tax payer, the best term deposit is 1% tax-free with An Post. For example, lodging €50,000 for five years will produce a return of approx €2,500 over the 5 year period.
CPI statistics indicate that inflation is running at negative rates at the moment (although the factors that make up the cost of living are a bit ambiguous e.g. mortgage repayments etc.).
In counterpoint, lodging €50,000 in a bank account at 1%, the higher rate tax payer will pay DIRT at 41%, PRSI at 4% (plus USC will probably take another chunk).
Investment in rental incurs a tax of approx 51%.
Is the stock market the only show in town?

 

[Lightning]

Do term deposit accounts provide any real value for money at the moment?

A lot of people are concluding no as the answer. Amounts in long-dated term deposits have declined by a significant 25% YoY in Irish bank accounts. Far less people are willing to lock their money away at current low return levels.

 

[Logo]

Fair enough. But I really dislike the market option. I traded in the past and was looted by a stock broker. I invested in some shares (PFE) but didn't have the chance to recoup any profits. (and yes I'm still a bit annoyed).

 

[dub_nerd]

Do term deposit accounts provide any real value for money at the moment?

Yes. If inflation is negative, and you are getting a positive rate of return, that is a real return. For some reason people never questioned this when nominal rates were several per cent, even though the real return net of inflation was about the same.

There has never been a no-risk way of earning several per cent above inflation. If you want to play the markets without being suckered by a middle man one option is to learn how to do your own investing and open a trading account. But from painful learning experience I can tell you the value of your investment may still go down as well as up.

 

[Logo]

Thanks for the replies. Just wondering if anyone can recommend a decent low-cost trading account for the investment and sale of shares on an infrequent basis. I assume it's like opening a deposit account, lodging funds and trading on-line. I've had some experience of trading with Goodbody on-line but found that the annual management fees were excessive when not trading on a regular basis.

 

[Sarenco]

Take a look at DeGiro - not a recommendation exactly but they are cheap.

 

[sunnydonkey]

'Trading' is not an equivalent to a term deposit. The closest thing would be a high yielding blue chip share (eg oil sector) which would pay 4 or 5%. Get the shares in certificated form and put under the bed for the length of the term.

 

[dub_nerd]

'Trading' is not an equivalent to a term deposit. The closest thing would be a high yielding blue chip share (eg oil sector) which would pay 4 or 5%. Get the shares in certificated form and put under the bed for the length of the term.

Even that would be incredibly dangerous advice to someone who doesn't know what they're doing (I'm not suggesting you intended it as advice). A single blue chip share would be very undiversified and we've seen how that can work out since the GFC, e.g. banks. Right now, oil sector blue chips are selling off assets to prop up dividends in the face of low oil revenues. Any permanent cut of dividend could send such shares plummeting very quickly. Even without that oil stocks have been quite volatile lately due to off-again-on-again OPEC plans to cut output. AAM rules prevent discussing any particular share (nor would I anyway), but the idea that anyone would buy any single stock to stick under the mattress is a bit scary.